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(Bloomberg) -- Australian unemployment unexpectedly climbed to a four-year high in June as hiring almost stalled, suggesting a loosening of the labor market and bolstering the case for the Reserve Bank to reduce interest rates next month.

The currency declined by more than a half percent as the jobless rate increased to 4.3%, the highest level since November 2021 and exceeding forecasts for an unchanged 4.1%, data from the Australian Bureau of Statistics showed Thursday. Employment rose by 2,000 driven entirely by part-time roles, against economists’ expectations of a 20,000 gain.

The yield on policy-sensitive three-year government bonds fell almost 10 basis points while stocks advanced. Money market bets firmed to fully price a cut in August and another after that, with a better than 50% chance of a third.

The data is crucial for RBA policymakers as the resilience of the labor market, and worries about it rekindling price pressures, have been key reasons why they’ve shown patience in the current easing cycle. The central bank has cut twice since the start of the year — shocking the market last week with a decision to hold at 3.85% — and today’s weak jobs report, following a subdued reading in May, could suggest a turn in fortunes.

“There is now a deeper question of whether we might be starting to see the labor market resume its gradual softening after this recent period of resiliency,” said Ryan Wells, an economist at Westpac Banking Corp. “The data strengthen the already-strong case to deliver the next rate cut in August.”

The central bank’s board said after its shock pause at 3.85% that it wanted to wait for further evidence that inflation was sustainably hitting the midpoint of its 2-3% target. The quarterly CPI report due on July 30 is seen as the next major reading for the policy outlook.

Investors will be watching a speech by Governor Michele Bullock next Thursday and a fireside chat with her deputy, Andrew Hauser, a day after the inflation data for further clues. Economists also expect the RBA to downgrade its employment forecasts in August.

What Bloomberg Economics Says...

“The undershoot in Australia’s job gain in June following a drop the prior month all but locks in another rate cut at the RBA’s August meeting.”

— James McIntyre, economist.